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To me there seems to be a certain sort of karma in this. Momentum prop trading doesn't really add value to anything in my opinion (cue the arguments that momen

by phyalow 12y ago

To me there seems to be a certain sort of karma in this. Momentum prop trading doesn't really add value to anything in my opinion (cue the arguments that momentum prop trading somehow adds real value to our society). Yet some momentum prop trading creams a profit by shuffling money around very quickly. So if there are sometimes big losses like this from a bug, then it seems to even things out somewhat.

byEngineer 12y ago
The profit to the society is from regular guys like you and me not partaking in the scam anymore. Not spending money on it. Distrusting the game. Long term it makes sense: people will start investing long term based on fudamentals vs wanting to get rich quick on hocus locus TA. Short term trading is losers game. You will always loose against HFT. So instead of doing that, read the companies fundamentals. Learn about their debt levels. Earnings. Read their books. And only then invest with 1-2 year time horizon minimum. HFT is valuable to the society as it makes the society understand that treating Markets like casino gambling isn't working.
tomp 12y ago
"Anything of value" is a subjective measurement - you could say that stock markets don't add anything of value, or you could say that they enable more investments, since you're able to liquidate your investment whenever you want. Trend following, and mean-reversion following (what this article describes) are techniques that counteract the basic human irrational/emotional biases. Ideally, they should prevent bubbles and stop crashes. They make markets more rational.
- collyw 12y ago
  "They make markets more rational." Said during the greatest economic downturn since the great depression.
  - ycombobreaker 12y ago
    They don't help with long-term behavior, but they definitely can make markets more rational on a shorter time scale. You can think of HFT market-makers as adding friction to a system. They will generally take positions against the trend, reducing (or maybe just delaying) price impact of the trend traders. EDIT: I should point out: _all_ market-makers provide this benefit to the market. The difference now is that HFT is automated, and like most forms of automation it has out-competed most manual market makers, for better or for worse. AFAIK, the last bastion of manual market-making is NYSE, where the humans have information and discretionary powers that are not granted to any of the robots.
collyw 12y ago
agreed
joshu 12y ago
Disagree. Momentum prop trading means that there's a ton of liquidity available to trade against when you actually do have new information.

by phyalow 12y ago

byEngineer 12y ago

The profit to the society is from regular guys like you and me not partaking in the scam anymore. Not spending money on it. Distrusting the game. Long term it makes sense: people will start investing long term based on fudamentals vs wanting to get rich quick on hocus locus TA. Short term trading is losers game. You will always loose against HFT. So instead of doing that, read the companies fundamentals. Learn about their debt levels. Earnings. Read their books. And only then invest with 1-2 year time horizon minimum. HFT is valuable to the society as it makes the society understand that treating Markets like casino gambling isn't working.

tomp 12y ago

"Anything of value" is a subjective measurement - you could say that stock markets don't add anything of value, or you could say that they enable more investments, since you're able to liquidate your investment whenever you want. Trend following, and mean-reversion following (what this article describes) are techniques that counteract the basic human irrational/emotional biases. Ideally, they should prevent bubbles and stop crashes. They make markets more rational.

collyw 12y ago
"They make markets more rational." Said during the greatest economic downturn since the great depression.
- ycombobreaker 12y ago
  They don't help with long-term behavior, but they definitely can make markets more rational on a shorter time scale. You can think of HFT market-makers as adding friction to a system. They will generally take positions against the trend, reducing (or maybe just delaying) price impact of the trend traders. EDIT: I should point out: _all_ market-makers provide this benefit to the market. The difference now is that HFT is automated, and like most forms of automation it has out-competed most manual market makers, for better or for worse. AFAIK, the last bastion of manual market-making is NYSE, where the humans have information and discretionary powers that are not granted to any of the robots.

collyw 12y ago

agreed

joshu 12y ago

Disagree. Momentum prop trading means that there's a ton of liquidity available to trade against when you actually do have new information.